The insurance sector is digitalising. And now?
In October, the tenth edition of our MBA in Financial Services & Insurance (MBA-FSI) will start. Arné van den Boom, director of the health insurer Interpolis (part of Achmea, the largest insurance company in the Netherlands) graduated in the first edition of this programme (1999-2000). How does he look back on his time at Vlerick? Has the sector changed over the years and what does he consider the main challenges?
From the front row
While 1999 might seem a long time ago, Arné still remembers it well. “It was the time of the first internet bubble. Everyone expected the internet to have a major influence on all the existing business models. We knew we were being taught all kinds of marketing methods and techniques which might become obsolete sooner or later. Most of us opened our first email accounts at that time. In brief, we felt we were experiencing the start of a landslide.”
That particular internet bubble burst in March 2000 when World Online went public and the share price plummeted two days later. World Online, a Dutch initiative, suddenly found itself on the front page of the Financial Times. “It was an exciting and also educational time”, he says. “I already had quite a bit of work experience when I took the MBA, but it gave me a solid business foundation which has since proved useful in many different situations. When I think about the exchange of knowledge with colleagues from other financial institutions, knowledge in the area of strategic management, the view of reinsurance from Münchener Rück and Swiss Re, for example, I know for sure that my toolkit would be a lot lighter today without that MBA.”
Bricks and mortar making way for digital
“I was taught 16 years ago during my MBA that bricks and mortar were making way for digital alternatives and I have certainly seen this happen with my own eyes. Paper declarations have gradually been digitised and stacks of cardboard boxes have been replaced with computer systems. In addition, sales & service are increasingly taking place online these days”, says Arné. “At the time, I wrote my thesis on connecting new internet systems with legacy systems. Well, let me tell you, sixteen years later I'm still in the middle of that process”, he laughs.
This increasing digitalisation will also remain a challenge in the years ahead. “The shift from old to new, digitally driven insurance models is still in full swing. The possibilities are expanding at an increasingly rapid pace and according to Moore's law, this digital acceleration will only continue in the years ahead.”
As a result of digitalisation, the insurer's business model will undergo further changes. Although old risks will disappear, new risks will take their place. “Take driverless cars, for example. Within the next 20 years, I think that losses resulting from car accidents will decrease, but losses resulting from cybercrime, for example, will be on the rise.”
According to Arné, digitalisation in the insurance sector is also leading to moral dilemmas when it comes to the major issues of good and evil. "How far can you go with the use of genetic information? How will this affect solidarity? Who will have data and who won't? However, the biggest challenge in an age when so many jobs are being automated out of existence is to find alternative forms of employment, ensuring sufficient meaning and fulfilment in our society. After all, the population is constantly increasing.”
Clients lead the way
Are clients ready for the digital era? Arné is emphatic on this point: “Oh yes, clients are always ahead of companies.” And he thinks it is a myth that older insurance clients are getting left behind: “In the Netherlands, internet use among people aged 70+ is almost as high as in all the age categories beneath it. In that respect, I feel very optimistic. Incidentally, the inland revenue has just abolished the ‘blue envelope’. From this year onwards, everyone in the Netherlands will have to submit their tax return online. And this is not causing any issues.”
Like its clients, Interpolis is very active on social media. “These days, it gives you a licence to play. The value which people attach to your brand and the accompanying service determines the significance of your brand in the sector. We use social media to share knowledge on the subjects of living and driving safely. Radio and TV commercials are still important, but we are now also reaching our clients through communities and our website. It's important to come up with a good mix of your own and paid media and to distribute your content across the various channels as effectively as possible. Our presence on social media is being well received and we are making good progress in this area.”
IT will only become more important
Does he have a tip for the organisers of the MBA in Financial Services & Insurance? “Make sure you pay enough attention to the link between IT and marketing. IT will drive your business more than ever before and knowledge of modern marketing techniques is indispensable”, replies Arné. “In commercial functions, insurance companies will also require more and more technical skills. They will also need to understand how IT works and can facilitate things.”
Finger on the pulse
“For next year, we have certainly taken Arné's recommendations into account”, says Kurt Verweire, Professor of Strategy and programme director of the MBA-FSI. “Digitalisation is a topic which already gets a lot of attention in each module, but we are also focusing specifically on the new role of IT and Big Data. We are keeping our finger on the pulse. The content of the programme always responds to the current developments in the financial services sector.” He continues: “Some of the themes from the first edition are no longer relevant today. At that time, for example, ‘How valuable is the bank insurance group and how should it be managed?’ was a relevant question. This business model has gradually been called into question. The mergers which were announced with great aplomb in those days were also dismantled with the same aplomb.”
It is not just the content of the modules which has evolved, Vlerick's partners for the programme have changed too. “We are constantly seeking out the best partner at any given time.” Kurt has also noticed a change in the participant profile: “It has become much more international. Now we even have students from the Middle East. I think this is a positive development. An international group of this kind has a completely different dynamic and many more different viewpoints are put forward.” T
here are six residential modules, each lasting two weeks, in six different countries all over the world. Is such an ambitious programme still justified in these times of austerity, now that so many banks and insurance companies are casting off their international branches and focusing on the local market once again? “The pace of change in the sector is constantly increasing. Your competitors no longer are other banks and insurance companies but the FinTechs and InsurTechs. And when competition can come from any angle, it's best to be well prepared. The best way of finding out what's happening is to go to various international markets, which is exactly what we are doing. If you ask me, this programme has never been so relevant.”
Kurt is still in regular contact with many alumni. Some of these contacts have already led to interesting business cases. The strategic and cultural transformation of Interpolis, 20 years ago, is one of them.